A few days after announcing that its cash flows had turned positive, Tesla Motors ( TSLA ) has opened a new assembling plant in Netherlands as its first foray into the European electric car market. Although the auto industry is struggling in Europe with sales down 8% this year, the luxury industry is much better off.
Besides Europe, the automaker also opened its first retail outlet in Canada in November. More than 13,000 reservations of Model S have been made globally through September. We forecast Tesla to sell around 18,000 units of its Model S in 2013, but given its good reviews and overall reception, the automaker could comfortably sell all of its cars produced.
Not All That Easy
The distribution facility will be used for warehousing as well as assembling purposes and is not a production facility. The fact that Tesla will assemble its vehicles in Europe will help the automaker circumvent import tariffs. But due to high VAT taxation in the region, the price of its cars in Europe could be higher than that in the U.S. The base price of Model S starts from $60,000 in the U.S. (without the Federal assistance of $7,500) and prices go as high as $95,000 for the Model S Performance.
Tesla is also in the process of setting up Supercharger electric car charging stations across the U.S. where its customers can recharge their batteries for free. However, these will not be present in Canada or Europe and could turn away potential customers. Along with the initial high cost of purchasing an electric car, the inconvenience caused due to a lack of charging stations acts as a big deterrent for customers looking to buy electric cars.
Production for the Model S is scheduled to rise dramatically to 400 units a week in 2013. The electric automaker only sold 268 units in the third quarter due to limited production. The electric car manufacturer, which originally projected annual revenue in the range of $560-600 million at the start of the year, later revised it downward to $400-440 million primarily due to a decline in the expected number of Model S units produced during this year.
We currently have a Trefis price estimate of $37 for Tesla , which is more than 10% above the market price.